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Pursuant to a congressional request, GAO reviewed the growth of the Army Aviation Systems Command's (AVSCOM) inventories beyond military requirements, focusing on: (1) causes for excessive stock increases; and (2) actions needed to limit inventory growth without affecting military capabilities.

GAO found that: (1) unrequired AVSCOM inventories increased from $207 million to $804 million, or 289 percent; (2) 21 of 45 unrequired inventory items, totalling $453 million, were end items for obsolete equipment; (3) although the Army rescinded a 1984 moratorium limiting the disposal of end items, it was still reluctant to dispose of the unrequired inventories for fear that it would need them for future contingencies; (4) the Army's inventory retention policy permitted retention of unrequired stocks under economic, contingency or numeric retention levels; (5) 13 of 45 items, valued at $33.8 million, exceeded military requirements because AVSCOM overestimated the demand rates for those items; (6) AVSCOM acquired excessive stocks for 6 of 45 items, valued at $26 million, because its inventory database computed incorrect requirements levels from erroneous information entered by Army personnel; (7) other factors accounted for $18.4 million in unrequired AVSCOM inventories; and (8) despite recommended curtailment of procurement activities and an awareness of database inaccuracies, AVSCOM continues to emphasize buying over cancelling unneeded items, and has not established a system for correcting database errors.

Recommendations for Executive Action

Status: Closed - Implemented

Comments: Regulations were revised and a computer model was developed to assist item managers in making contract reduction/termination decisions.

Recommendation: The Secretary of the Army should direct the Commander, Army Materiel Command (AMC), to establish a systematic approach to aggressively cancelling or reducing planned procurements when items are not needed to meet current requirements. This approach should also include a documentation trail to enable managers to evaluate the economic trade-offs involved in cancelling or reducing planned procurements and taking delivery of unneeded items.

Agency Affected: Department of Defense: Department of the Army

Status: Closed - Implemented

Comments: Action was taken to eliminate numeric retention as a retention category.

Recommendation: The Secretary of the Army should direct the Commander, AMC, to dispose of items that are not needed to support end items being phased out of the Army's inventory.

Agency Affected: Department of Defense: Department of the Army

Status: Closed - Implemented

Comments: Advisory groups have been established at each NICP to study, identify, and resolve database errors and problems. A new supply management database is being developed and should be on-line by September 1992 to assist item managers in correcting database problems. Since all the necessary steps are in process, the recommendation can be closed.

Recommendation: The Secretary of the Army should direct the Commander, AMC, to reemphasize to item managers the need to be more responsive to changes in forecasted demands and to update and correct the database that computes requirements.

Agency Affected: Department of Defense: Department of the Army

Status: Closed - Implemented

Comments: This area was identified as a material weakness in the Army's FMFIA report for fiscal year 1990.

Recommendation: The Secretary of the Army should direct the Commander, AMC, to report, as part of the Federal Managers' Financial Integrity Act (FMFIA) process, the actions being taken to address the database problems and to cancel or reduce unneeded procurements.